I do think some people have more of an ability to be creative, and imagine more that others. It seems that children naturally have the ability to have such flexibility with imagination, the truly creative ones, even moreso.

My littlest D and other very creative people I know are very sensitive. It's hard to figure out how to teach them to make the call between creating stories for entertainment and mixing fact with fiction in a way that may be taken as purposeful deception.

I tried reasoning with small one when she was about 5, I didn't focus too much on it before then. DD8 always listened to reason, not the case with DD, now 6.

It finally got to the point that we really did need her to have some negative consequences at home before she started to hurt her credibility with other people.

I took the hard line and started "busting" her whenever I could catch her. It's hard to figure out, but I did notice she had the slightest little twinkle in her eye when she thought she had someone going.

It didn't stop the behavior right away, but I was persistent and never let one get buy if I noticed.

I think she finally figured out that telling stories for fun just to see if she could get away with it was not a good thing when I busted her telling a story about a new friend.

We were sitting outside with some of her other friends, she made sure she had everyone's attention and then announced: "Did you guys know that Amy's dad is in jail?" Of course all the five year olds were all, oohh and ahhh and oh no! I basically called her out and told her she was never allowed to play with her new friend of have her over or go to her house.
You should have seen her face!!!
She didn't expect that and she was shocked, "why?" she said:

And I just told her that she isn't allowed to play with kids whose daddys are in jail.

She looked at me in shock and awe and noticed that I had a little twinkle in my eye.

I'm pretty sure that's when she made the connection. smile